DMR-Markets, including gold, letting the dust settle from the mid-term elections

As trading opens in U.S. financial markets, it seems the prevailing attitude is to let the dust settle from the mid-term elections and take some time to put the results into perspective. Gold pushed higher overseas, leveled, then gave up its gain before the New York market opened. The stock market’s reaction has been equally non-commital though the Dow is up 125 at the moment. Reactions in the FOREX and bond markets thus far have been low-key as well. In general, it looks like investors are taking a breather this morning, though that could all change as we move along. We remind our readers that, though the election is behind us, the Federal Reserve Open Market Committee meeting is upon us. Proceedings start today and end tomorrow and that could be contributing to gold’s tepid performance thus far today. Fed meetings – even those like this one which is expected to be low-profile – have been known to act as a drag on the gold price.

Quote of the Day“Simple: Prices remain distorted by the long-term effects of the QE era. The blind central bank binging on corporate debt of the QE era continues to distort because prices have not yet fully adjusted downwards. (Liquidity is also stalled by technical reasons, like market making being regulated out of existence – a story for another day..) The smart buyers aren’t going to buy bonds at these levels – they are waiting for the correction. Inflation hovers in the background, and who wants to buy at rates that would leave holders with a real negative return? Anyone prepared to buy at current levels is making an implicit bet central banks will step back into distort the market again by keeping rates artificially low…” – Bill Blain, Blain’s Morning Porridge (10-23-2018)

Chart of the Day

Chart note: Last week national security advisor John Bolton focused attention on the national debt saying that it was “a threat to the society.” The national debt now stands at $21.7 trillion and $1.2 trillion has been added thus far in 2018. “And that kind of threat,” he added, “ultimately has a national security consequence for it.” This article is a bit vague as to what that “national security consequence” might be. An obvious one, though, is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried – particularly with interest rates on the rise. As you can see, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.

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